One Year In - A Recap

Discussions about personal psychology for the individual trader.
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Joined: Fri Jun 03, 2011 11:21 am
Location: Austin, TX

One Year In - A Recap

Post by Toosday » Tue Oct 09, 2012 8:04 pm

I have spent some time digesting what I have learned trading over my first year full time for myself. I am not intending this to get into a debate, it is purely a statement of my beliefs which for some may be wrong or right for others. I reserve the right to contradict myself in the year two recap.

What I have learned (in no order):
-Trading is hard. It takes a lot of work to make money and a very tough psyche to stick with it. The learning curve is measured in years.
-Knowing where the market will go is tough, knowing where and when the market will go is more than twice as tough.
-You need to be able to trade short and long to make excess market returns.
-Simple trend trading techniques do not work well for trading on the short side.
-The most anxiety for me is missing a big move, which is a characteristic of trend following. This anxiety is the largest emotional problem for me. My trading has gotten better with systems that reduce the dependency on a small number of trades.
-Trading more instruments, while mathematically may produce higher backtested returns, increases the degrees of freedom in your system and may effect performance. The degrees of freedom are in the form of risk controls or other drawdown management tools.
-Pure trend trading for living expenses is not something I would pursue. Trend trading on a portion of wealth makes sense.
-Trend following does do other things at certain times.
-Waiting for a move to be confirmed improves systems.
-The amount of funds under management using trend following has decreased the risk adjusted returns of trend following. Note the returns are not negative, just low.
-Small traders need to use their advantages, ie lower slippage and the ability to sit out of the markets.
-Small traders, at times, have the ability to think in terms of dollars and not percentages. This difference in utility theory is important when paying your mortgage with trading.
-Correlation between commodities is higher than it was 10 years ago.
-A fool with a tool is still a fool.

When I first got into this, my ultimate goal was to manage funds. I have stopped focusing on this and switched to just trying to make a good living as a private trader. This is mostly a result of not wanting the stress that comes with an income with more zeros. I find that diversifying my income streams (and energies) into other things makes me a better trader.

This board has been very helpful to me as a trader and I wanted to post this in an effort to help others. Please feel free to offer feedback.

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